XChange Public Sector: Large Systems Integrators Under Pressure

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The size of federal IT contracts is shrinking, causing large systems integrators to push downstream and compete on projects that just a few years ago they wouldn't have touched.

That trend means more competition for small and midsize government solution providers, but it could also spell opportunity for those smaller companies to partner with larger ones -- providing they can demonstrate value to the big guys, said a panel of system integrator executives at the XChange Public Sector conference in Charlotte Thursday.

The federal government is moving away from large IT programs because the funding of those programs has become a challenge, said Rick Dansey, senior vice president of CACI's Civilian Solutions Group.

"The funding is easier for smaller programs. It takes some of the big integrators out of their comfort zone. The big buys are used to going after $500 million deals. That's what they do. Now they're down to $20 million to $25 million deals," Dansey said.

Smaller projects also have less risk, less oversight and can be completed more quickly, which draws the interest of large systems integrators, Dansey said. But the large SIs also know that small businesses that regularly compete in that space have relationships and can be more nimble, so the systems integrators are looking to partner up with the SMB solution provider community, he said.

Allison Patrick, vice president and director of business development for the Civil Gov Group, SRA International, said the name of the game in the federal space has become market share. With federal budgets declining in the civilian space, the competitive landscape has been leveled, she said.

"It's just a market share grab. The way we think about it is we have account teams and whoever has the smartest, hardest working account teams is going to win going up against those opportunities," she said. "We had been mandated to fill pipelines with $50 million or above [deals]. We're seeing the number of those opportunities shrink considerably into more manageable bites."

Gene Zapfel, group vice president and member of the federal executive committee at Unisys, admitted to the crowd of solution providers at XChange that everything the company chooses to bid on now, "we have to eat someone else's lunch," but adds that Unisys is also getting its lunch eaten too.